International oil market – new directions

This article focuses on changes in the international petroleum industry during the past 20 years and examines some major trends, especially since the oil price collapse of 1986. The resumption of rapid increases in oil demand since 1986 in the developed market economies and the developing world has already led to a pronounced production shift to OPEC member countries where output increased by 6.6 million barrels per day or, 37% since 1985. Cutbacks in petroleum investments in non-OPEC countries are likely to result in even more dependence on the vast proved oil reserves of OPEC. However, the gap between peak output and sustainable production capacities in OPEC has narrowed and there is an urgent need for sizeable investments to expand capacities. Such investment programmes are already being implemented by transnational oil corporations in countries such as Indonesia and Nigeria where the companies had retained equity participation. In other countries such as Iraq and Venezuela where oil operations had been nationalized, transnational oil corporations are being invited to participate in new arrangements for oil production. New arrangements are also being considered in Eastern Europe and the USSR. New understandings, dialogue and cooperation between oil-consuming and producing countries will be necessary for the security of investments, supplies and markets in this process. The unanswered question is whether such cooperation can be achieved in time in order to avoid yet another energy crisis.     

Energy consumption trends in high growth Asian economies before and after 1986

In 1986, world oil prices declined sharply. Lower oil prices have been favourable to economic growth and price stability in Asia. However, oil consumption has also been growing rapidly in developing Asian countries including those dependent on imported oil. The increasing dependence on oil as a source of energy since 1986 is a striking reversal of the previous trend. In their pursuit of rapid industrialization, Asian countries have neglected energy conservation and diversification strategies. Unless energy policy is redirected, countries like Korea, Thailand and the Philippines could be seriously hurt by a sharp rise in oil prices. An increase in oil prices is almost inevitable in the next few years.     

From the erosion of crude oil prices to reorganization of the oil industry

Comparison of data on world energy consumption for 1986, 1987 and 1988 indicates that the consumption of all forms of energy increased during the period, but the demand for oil increased at a lesser rate than that of other energy sources. Although the pattern varies between countries, the overall picture is one of increased use of natural gas, coal, nuclear and hydropower as an energy source. Part of the reason for the low growth in oil demand is the oil conservation measures put in place when oil was much more expensive, but may partly be due to the scepticism of many people about the future movement of oil prices. The likely continuation of a low growth market for oil has led some oil exporting countries to move downstream in an effort to secure a dependable market for their oil and oil products.     

The political economy of transnational oil

This paper identifies some of the major policies adopted by the public authorities of both the oil importing and oil exporting countries, as well as the business strategies followed by the major energy corporate groups. The significance of governmental policies and business strategies are often reflected in transnational political or economic relations, market structures and price formation. The focus of this paper is to ascertain the impact of those policies and strategies.     

Coal Receiving Terminals in Relation to Electricity Generation in Developing Countries

With the rapid increase in the price of oil in the 1970s, many developing countries are beginning to look to steam coal as an energy source. Much of this coal will have to be transported from coal-producing countries to coal-consuming countries by sea and coal-receiving terminals will have to be built especially in those countries which have not been coal importers in the past. The international market in steam coal is examined and predictions are made as to the amount of coal that developing countries are likely to import from electric power generation. The operation of a coal-receiving terminal is discussed and estimates are provided as to the size and cost of coal terminals required to meet the coal import needs of developing countries.     

The Worldwide Availability of Fluorspar

This paper reviews a recent assessment of fluorspar reserves and resources for 13 market economy countries and the People's Republic of China, and how they relate to the overall availability of fluorspar on the world market. Current world production, consumption and world trade issues are discussed.
Nearly 5 million tonnes of fluorspar were produced in 1985, and approximately 60% of that enters the world export market. In recent years world trade has started to shift away from the acid, metallurgical and ceramic grades of fluorspar, as ore-producing countries look towards higher-value downstream products.
Total potentially recoverable fluorspar from 52 major producing mines and deposits is estimated at nearly 95 million tonnes (as of January 1985). The Republic of South Africa accounts for 31% of the reserves, with Mexico and the People's Republic of China each contributing 18%.
The average total cost and availability of fluorspar is evaluated. Approximately 75% of acid-grade fluorspar evaluated is potentially available at or below a 1985 constant-dollar cost of US$110 tonne⁻¹. Nearly 94% of metallurgical grades are potentially available at costs of US$75 tonne⁻¹ and below, and virtually all of the ceramic grades could be produced at costs below the 1985 reported market price of US$103 tonne⁻¹.     

World copper market, 1973–1982, and international stabilization policies

This article critically examines international price stabilization policy in relation to the main features of the world copper market and the structural changes that have affected the industry in the decade up to 1982. The first section summarizes the main features of the world copper market, briefly discussing the principal structural changes; the second part examines the recent pattern of investment in copper and changes in ownership of some copper producing companies resulting from the need for improved cash flows due to the adverse effects of the recession; and the third part analyses the practical and theoretical issues relating to the question of price instability. A number of formidable problems are likely to arise from such price stabilization policies and it is concluded that it is because of these difficulties that the policies have not been implemented. Consequently, international commodity agreements designed to minimize or avoid price instability have proved difficult to conclude. New questions on which consensus is likely should be examined to promote intergovernmental co-operation, and hence market stability. With that end in view, this article lists some new questions that could form the basis of an agenda for exploratory intergovernmental discussions on copper.     

An overview of global gold market and gold price forecasting

The global gold market has recently attracted a lot of attention and the price of gold is relatively higher than its historical trend. For mining companies to mitigate risk and uncertainty in gold price fluctuations, make hedging, future investment and evaluation decisions, depend on forecasting future price trends. The first section of this paper reviews the world gold market and the historical trend of gold prices from January 1968 to December 2008. This is followed by an investigation into the relationship between gold price and other key influencing variables, such as oil price and global inflation over the last 40 years. The second section applies a modified econometric version of the long-term trend reverting jump and dip diffusion model for forecasting natural-resource commodity prices. This method addresses the deficiencies of previous models, such as jumps and dips as parameters and unit root test for long-term trends. The model proposes that historical data of mineral commodities have three terms to demonstrate fluctuation of prices: a long-term trend reversion component, a diffusion component and a jump or dip component. The model calculates each term individually to estimate future prices of mineral commodities. The study validates the model and estimates the gold price for the next 10 years, based on monthly historical data of nominal gold price.     

Oil and gas reserves of the Middle East and North Africa

A quantitative estimate of the petroleum reserves of the Middle East and North Africa is presented and analysed in terms of the region's ability to meet current market demand for a sweet light crude. Costs of Middle East production are compared with those of other oil-producing regions. With an average costs of US$4/bbl, the Middle East has both the largest oil reserves and the lowest cost oil in the world. While new and improved technology of exploration and production may lessen this price advantage in the future, it will not eliminate it. Because of these two factors, the Middle East will continue to play an important role on the world energy stage well into the next century.     

Recent changes in international commodity agreements

The contents of international commodity agreements have changed from those in which open-ended intervention mechanisms regulated the market defending a normative price to those limiting intervention so as not to obscure market forces and consequently the market price. Underlying this change is the principle to which the developed countries accorded the highest priority, namely that the interests of producing and consuming countries must balance to avoid an indiscriminate transfer of resources. On the other hand, the principles which guided agreements that set a normative price were based on the grounds that the market price determined by unequal partners was unfair and that internationally agreed developmental goals implied untied and unconditional resource transfers by means of normative, higher than market, prices. These two sets of principles were incompatible. As a result negotiations were not only difficult but inconclusive. Another reason for this outcome was that the question of the cost effectiveness of market duplicating agreements based on the principle of balanced interests was unresolved. These reasons explain why commodity agreements do not figure currently in substantive discussions on North-South cooperation and why only three commodity agreements have a functional role and even of these three, one is not in force definitively.     

Alternative natural gas contract and pricing structures and incentives for the LNG industry

Gas conversion to liquefied gas (LNG) and transport by LNG tankers is one option for meeting expanding gas consumption and for gas traded internationally. This paper examines the impact of the traditional gas contract provisions of indefinite pricing, market out price ceilings, and take-or-pay requirements on the profitability of LNG projects in the context of markets characterized by price and quantity uncertainty. Simulation experiments are used to examine and calibrate the effects of those provisions. The results provide guidance to operators, host countries and purchasers in structuring such contracts. The paper also assesses prospects of future expansion of world LNG capacity.     

The crude oil market and the gold market: Evidence for cointegration,causality and price discovery

Given that the gold market and the crude oil market are the main representatives of the large commodity markets, it is of crucial practical significance to analyze their cointegration relationship and causality, and investigate their respective contribution, from the perspective of price discovery, to the common price trend so as to interpret the dynamics of the whole large commodity market and forecast the fluctuation of crude oil and gold prices.     

The price of gold and the exchange rates: Once again

This paper examines the theoretical and empirical relationships between the major exchange rates and the price of gold using forecast error data. Among other things, it is found that, since the dissolution of the Bretton Woods international monetary system, floating exchange rates among the major currencies have been a major source of price instability in the world gold market and, as the world gold market now seems to be dominated by the US dollar bloc, appreciations or depreciations of that dollar would have strong effects on the price of gold in other currencies. The results of this study are rather different from those obtained in an earlier study of the same subject.     

The anatomy of three commodity booms

Three major commodity booms since the second world war are identified and analyzed. In all three, demand shocks predominated as triggers to the commodity price rises. The first boom, in 1950–51, was caused by the massive inventory buildup in response to the Korean war. The second, in 1973–74, was accentuated by widespread harvest failures and by OPEC's market management, which tripled the price of oil. The third boom started in 2004 and has not yet run its course. This time, the explosive growth of China's and India's raw materials demand has played a key role. The first two booms collapsed as the world economy went into recession and excessive inventories were sold out. The third boom may prove more durable since the world economy continues to expand briskly and commodity inventories have remained small.     

Trials and Tribulations of Third World Petroleum Development: Lessons and Advice for Prospective Producers

This paper presents a variety of lessons for governments of developing countries about how to begin to operate as new oil producers in the world petroleum market. Lessons, drawn from the recent experiences of currently producing LDCs, are identified for each stage of the industry from exploration and development through procurement and supply to refining and marketing.     

Petroleum taxation in West Africa

The petroleum tax systems of nine West African countries are compared and analysed for their effectiveness in capturing the maximum amount of oil revenues. As a general rule, those countries which are major oil-exporting countries have the highest tax rates whereas those which are oil-importing countries have the lowest. The tax systems have changed over time, reflecting inter alia, changing national attitudes towards foreign investment, the price of oil and domestic needs. One conclusion reached is that many of the tax systems in place today are regressive in that the tax rates are fixed and are not adjusted to the profitability or non-profitability of the oil field .     

Price prospects in Western Europe for internationally traded fossil fuels until 2000

A methodology for the long-term assessment of prices is designed and applied to the international markets for coal, oil and natural gas and likely price developments between 1990 and 2000 are explored. The coal market will remain competitive, and the long-term price will be determined by the total cost of marginal supply. The oil price will be set, even in the long term, substantially above the competitive level, by those who control the exceptional Middle East resource base. The traditional link between gas and oil prices will erode in the 1990s, and gas will be independently and competively priced by the turn of the century. Resource constraints are not expected to push prices upwards within the time horizon of the study. The relative price of gas will fall over the forecast period, and its market share will increase as a consequence.     

The ‘new’ economics of iron and steel

The author commences his analysis of the iron and steel industry by examining the historical background of the industry, and discusses its importance for the world economy. He examines the implications for the world industry of the successful development of the steel industry in Japan, and traces the evolution of a commodity cartel in the iron ore market, analysing the price levels of the commodity in the ‘free’ and ‘controlled’ markets. Following a discussion of the role of energy and coking coal supplies in the industry, the author examines the evolution of this industry in the less developed countries, with particular reference to the role of technology in the industry's development. He concludes that there have been important structural changes in the world industry, embraced by the concept of ‘partial demise’.     

Road transport fuel demand in the LDCs

Over the last decades, oil consumption in the developing countries hus been increasing rapidly. Road transport has accounted for most of this increase in demand. It is the thesis of this paper that future growth in oil demand in developing countries will occur mainly in the road transport sector and that this growth will be surprisingly strong. Estimated income and price elasticities for several developing countries are presented and forecasts for oil consumption in road transport in the developing countries up to 2010 are given.     

World demand for cobalt: An econometric study

This article analyses the world demand for cobalt. It estimates short- and long-run elasticities with respect to price, activity and in some cases with respect to substitute-complement variables. For the USA these estimates have been obtained for all the important end-use categories. Aggregate elasticities are estimated for Japan, West Germany, France and for the non-communist world (excluding the USA). The appendix to the paper models price setting in the cobalt market and presents two simple simulations conducted on the world cobalt market.